Van Dyck Law, LLC is a full service Estate Planning & Elder Law practice. They write about comprehensive planning in the areas of wills, trusts, powers of attorney, medical directives, Elder Law and probate & estate administration.

August 2018

08/31/2018

It was common to get a pension when you worked for a company for 20 or 30 years, then retired with a gold watch and a complete package of retirement benefits.

Investopedia’s recent article, “Choosing How and When to Receive Pension Benefits,” reminds us that times have changed. Pensions have been replaced in large part by 401(k)s or other employer-sponsored savings plans. Those fortunate enough to still have a pension, will make it a large part of their retirement plan. If you have a pension, you’ll have to make some decisions when you are ready to retire.

The first choice is when to begin receiving pension benefits. Some plans offer payout options that like Social Security benefits. You can begin receiving benefits at 62, but you’ll get a smaller amount. If you wait until you’re 65, you’ll receive a bigger payout.

A critical decision is how you will receive your benefit payment. Many pension plans have a lump sum option that lets you cash out of the plan. You’ll also most likely have a few options for monthly payments. The lump sum payout avoids the possibility that your employer may default on your pension.

Most people who take a lump sum roll over the proceeds into an IRA, so they can control the tax consequences of the distribution. If you don’t take a lump sum, or if your plan doesn’t allow for one, you’ll need to decide how to receive your monthly payments. There is typically an option of receiving payments for the rest of your life (a single life annuity) or selecting from a variety of survivor options (joint and survivor annuity) that allow for your beneficiary to continue to receive payments after your death.

If you choose payments for your life only, your monthly income will be higher. The survivorship options result in a reduced payment. If you are married, the IRS requires that the benefit from a qualified retirement plan be paid out as a survivorship option, unless both spouses designate a different form of payment. The best choice for you will depend on your personal circumstances.

When trying to decide, weigh factors such as your age, your spouse’s age, each of your life expectancies, your health, your health history, your spouse’s health and health history, along with the other sources of retirement income that might be available to you or your spouse, after one of you passes. It’s also important to consider whether you have life insurance, the impact the death of one spouse will have on your combined income and the impact on your combined expenses.

If you are lucky enough to have a pension, make sure to get this right. You won’t get a second chance, once you start getting your benefits.

08/30/2018

“Recent tax law has led some seniors to assume that they can delete estate planning from their to-do lists. But that is a dangerous assumption.”

If your current will hasn't been updated in years, you may unintentionally shortchange or accidentally disinherit your loved ones.

This recent law in effect doubles the federal estate-tax exemption to roughly $11.2 million per person. As a result, most people won’t be subject to federal estate tax. However, before you unfriend your estate planning attorney on social media, understand that the drastic increase in the federal exemption amount means that old wills and trusts may be in dire need of an update.

Kiplinger’s recent article, “Update Estate Plans in Light of New Tax Law,” notes that the 2017 tax reform gives new opportunities for estate planning techniques to reduce your taxes. You also still have the other benefits of estate planning to consider, such as creditor protection, strategies to protect against elder financial abuse and maximizing bequests. However, remember that the new higher exemption amount sunsets at the start of 2026. That’s when the old $5 million exemption (adjusted for inflation) reappears.

For example, your estate plan may include a will and trust that applies formulas tied to the federal estate-tax exemption. With the new tax law, that could now have unintended consequences.

You should review your estate plan regularly, despite the legislative changes. That’s because life changes: your net worth changes, you or your children get married or divorced, grandchildren are born, and as a result, your old estate planning documents may not accurately reflect your wishes.

When you update your documents, remember your durable power of attorney. This type of gifting power may have made more sense when the federal estate tax exemption was much lower. However, with today’s higher exemption, broad gift provisions shouldn’t be included in some powers of attorney, because they leave seniors vulnerable to financial abuse.

Talk to your estate planning attorney about the new tax laws and how it impacts your strategies for your estate plan.

08/29/2018

“Nineteen months after pop star George Michael's death, his last wishes are finally being honored.”

According to the late singer George Michael's cousin, Andros Georgiou, the executors of George's estate have contacted all of the individuals and organizations who are named in the former Wham! singer's will.

Local authorities later announced that the 53-year-old pop star died from dilated cardiomyopathy with myocarditis and fatty liver.

Andros Georgiou says that Fawaz is challenging the will. Michael’s will stipulated that his enormous fortune of approximately $137 million should go to several charities, his sisters Yioda and Melanie and some members of his staff.

"People who worked for George and were loyal to him will be getting small amounts," his cousin Georgiou told The Sun. The newspaper reported that the housekeepers who worked at Michael’s North London and Goring homes are among those mentioned as beneficiaries in his will.

Andros told The Sun that Fawaz received money regularly from George, while the pop star was alive. Fawaz has yet to move out of Michael's home in London's Regent's Park and is in the process of contesting his exclusion from the will.

"Fadi is threatening to go all the way to High Court, but I think the estate will have to settle with him," Andros explained to the British newspaper. "He's been offered £500,000 [roughly $655,000] and I think the estate should pay a couple of million to get rid of him."

George Michael's former partner of 13 years, Kenny Goss, is also said to be contesting his exclusion from the will. However, his issue is reportedly related to funding the Goss-Michael Foundation, the non-profit Dallas art gallery featuring British art collections that he and Michael founded in 2007.

The Sun also reports that George's estate wants to dispose of the late singer’s three homes as quickly as possible.

08/27/2018

“It's important to understand that Medicare Part A and Part B leave some pretty significant gaps in your health-care coverage.”

Medicare Parts A and B cover a big part of your medical expenses when you turn age 65. Part A is your hospital insurance that helps pay for inpatient hospital stays, stays in skilled nursing facilities, surgery, hospice care and certain home health care. Part B is your medical insurance. It will help pay for doctors' visits, outpatient care, some preventive services, and some medical equipment and supplies. Most people can sign up for Medicare three months before the month they turn 65.

However, Kiplinger’s recent article, “7 Things Medicare Doesn't Cover,” gives us a closer look at what isn't covered by Medicare, as well as some information on supplemental insurance policies and strategies that can help cover the extra costs. That way, you won't wind up with unanticipated medical expenses in retirement.

Prescription Drugs. Medicare doesn’t provide coverage for outpatient prescription drugs. However, you can purchase a Part D prescription-drug policy or a Medicare Advantage plan that covers both medical and drug costs. You can get Part D or Medicare Advantage coverage, when you enroll in Medicare or when you lose other drug coverage, and you can change policies during open enrollment season each fall.

Long-Term Care. One of the biggest potential expenses in retirement is the cost of long-term care. Medicare provides coverage for some skilled nursing services, but not for custodial care. That’s help with bathing, dressing, and other daily living activities. However, you can buy long-term-care insurance or a combination long-term-care and life insurance policy to cover these costs. The earlier in life you make this purchase, the better.

Deductibles and Co-Pays. You’re responsible for deductibles and co-payments on Medicare Part A hospital stays and Part B doctors’ services and outpatient care. This year, you’ll have to pay a Part A deductible of $1,340 before coverage starts, and you’ll also have to pay a portion of the cost of long hospital stays, which is $335 per day for days 61-90 in the hospital, and $670 per day after that. Note that over your lifetime, Medicare will only help pay for a total of 60 days beyond the 90-day limit—known as “lifetime reserve days”—and after that, you’ll pay the entire hospital cost.

Part B typically covers 80% of doctors’ services, lab tests, and x-rays, but you’ll have to pay 20% of the costs after a $183 deductible in 2018. A Medigap (Medicare supplement) policy or Medicare Advantage plan can close the gaps, if you don’t have the supplemental coverage from a retiree health insurance policy. If you buy a Medigap policy within six months of signing up for Medicare Part B, then insurers can’t reject you or charge more because of preexisting conditions.

The Majority of Dental Care. Medicare doesn’t provide coverage for routine dental visits, teeth cleanings, fillings, dentures or most tooth extractions. Some Medicare Advantage plans cover basic cleanings and x-rays, but they usually have an annual coverage cap of about $1,500. You could also get coverage from a separate dental insurance policy or a dental discount plan.

Basic Vision Care. Medicare also generally doesn’t cover routine eye exams or glasses (except for an annual eye exam, if you have diabetes or eyeglasses after having certain kinds of cataract surgery). However, some Medicare Advantage plans provide vision coverage, or you may be able to buy a separate supplemental policy that provides vision care alone or includes both dental and vision care.

Hearing Aids. Medicare doesn’t cover routine hearing exams or hearing aids, but some Medicare Advantage plans cover hearing aids and fitting exams. Some discount programs also provide lower-cost hearing aids. If you save money in an HSA before you enroll in Medicare, you can also use that tax-free for hearing aids and other out-of-pocket expenses.

Medical Care Overseas. Finally, Medicare usually doesn’t cover care you receive while traveling outside of the U.S., except for very limited circumstances (like when you’re on a cruise ship within six hours of a U.S. port). However, Medigap plans C through G, M, and N cover 80% of the cost of emergency care abroad, with a lifetime limit of $50,000. Some Medicare Advantage plans cover emergency care abroad. You could also purchase a travel insurance policy that covers some medical expenses, while you’re outside of the U.S. and may even cover emergency medical evacuation.

Whether they act during your lifetime or after you pass away, these individuals frequently can make or break your estate plan. They have the ability to determine the fates of family relationships and financial security. However, most people don’t realize the potential consequences of their surrogates’ actions. As a result, they don’t give sufficient thought to whom they appoint to these important roles.

Let’s examine some of the major potential surrogates:

Agent: This is the person who acts for you under a power of attorney or advance medical directive.

Trustee: If you create a trust, you’ll create some limits in the trust agreement, and the trustee has the authority to make the final decisions about managing the investments, making distributions, paying taxes and other aspects of managing the trust.

Executor: This person manages and distributes your estate, after you pass away. Also known as a personal representative, the executor is charged with carrying out the wishes expressed in your will and other estate planning documents.

Social Security representative payee: Social Security will appoint someone to manage the benefits of someone who is unable to do so; usually it’s a family member or friend. The beneficiary can contact Social Security and ask that a particular individual be appointed, and they will consider the request.

Long-term care insurance lapse designee: Most insurers now allow the insured to choose an individual who’ll get a notice, if the LTC premiums aren’t paid. You also can name an alternate payee who’ll receive and manage benefit payments, when you can’t.

Agent for funeral decisions: States have varying regulations about who can make funeral decisions, and some have laws recognizing the appointment of an agent.

Financial account designees: When opening a financial account, some people like to select the transfer on death (TOD) option, or they open joint accounts with a relative or friend. This allows someone else to manage the account, when he or she isn’t able and who will inherit it without going through probate.

One issue with many of these surrogate designations is that different people frequently are named for tasks and responsibilities which overlap. Another issue is that people often are appointed without being asked or even told until they have to act. Finally, the person named to handle these responsibilities must be qualified.

Speak with your estate planning attorney to be sure you have consistency and avoid conflicts between the different surrogates.

Opening an account is simple. It can be done online or by mail, and it takes just $25 to start.

529 plan contributions help you save more money because your investment grows tax deferred, while they’re invested in the plan. You can select your investments or use age-based options that change, as the beneficiary gets closer to college age. The distributions are tax-free, if they’re used for qualified education expenses.

Grandparents are also able to create 529 accounts to benefit their grandchildren. If your grandchild doesn’t need the funds for school, you’re allowed to transfer the beneficiary designation to another grandchild or family member.

There are also estate planning benefits to opening a 529 plan. The annual gift tax exclusion is $15,000 for a single person, and some plans lets you to give up to five years’ worth of gifts at one time. You could gift $75,000 for a single filer and $150,000 for couples.

Education and investing are terrific examples of long-term planning, and whether it’s from parents or grandparents, a 529 plan is a win-win for education and college funding.

08/21/2018

“Defendants Sent Fraudulent Prize Promotion Mailings to Thousands of Consumers in the United States”

Tully Lovisa, Shaun Sullivan, and Lorraine Chalavoutis were recently indicted in New York federal court. They were charged with mail fraud and money laundering for their participation in a fraudulent mass-mailing scheme. Their actions tricked hundreds of thousands of consumers—many of them elderly—into paying at least $30 million in fees for falsely promised cash prizes.

Attorney General Jeff Sessions, Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Peter R. Rendina, Inspector-in-Charge, United States Postal Inspection Service, New York Division (USPIS), announced the indictment, according to a US Department of Justice press release titled “Three Long Island Residents Arrested In Elder Fraud Scheme”

“Earlier this year, when we announced the largest elder fraud sweep in history, we sent a clear message: we will hold perpetrators of elder fraud schemes accountable wherever they are,” Sessions said. “When criminals steal the hard-earned life savings of older Americans, we will respond with all the tools at the Department’s disposal–criminal prosecutions to punish offenders, civil injunctions to shut the schemes down, and asset forfeiture to take back ill-gotten gains. Today’s indictment shows we are following through on this promise, and fraudsters everywhere should take note of it.”

The fake prize-promotion mailings said that recipients could receive a large cash prize, in exchange for paying a modest fee. However, none of them did. The scheme began after the Federal Trade Commission (FTC) sued Lovisa in 2010 for sending deceptive prize-promotion mailings.

In response to that suit, a federal court in California enjoined Lovisa in December 2010 and April 2012 from any involvement with prize-promotion mailings. Nonetheless, she conspired with Sullivan and Chalavoutis to create numerous prize-promotion companies using straw owners and aliases to continue defrauding consumers. Chalavoutis opened bank accounts in the name of straw owners and helped conceal the involvement of Lovisa and Sullivan in controlling the operation.

Prosecutors also claim that Lovisa submitted a false compliance report to the FTC, in which he claimed not to be involved in prize-promotion mailings. The additional wire fraud and money laundering charges involve Lovisa’s further deception of the FTC concerning the court-ordered sale of a house he owned in Nevada. According to the indictment, Lovisa arranged a sham sale of the house for $155,500 in 2012 that allowed him to maintain control of it and only give the FTC proceeds of that sale. Lovisa subsequently sold the house in April 2015 for $540,000.

If convicted, the defendants face up to 20 years’ imprisonment for mail fraud, wire fraud, and conspiracy. Each charge also carries a statutory maximum fine of $250,000 or twice the gross gain or gross loss from the offense.

When it’s all added up, Beau Cassidy will inherit roughly $1.68 million—which is more than 10 times what the sum was initially reported to be his when his father, the former Partridge Family star, passed away at the age of 67 from organ failure in late 2017.

His daughter Katie Cassidy was omitted from his will. David claimed he was no more than a biological father to her. Cassidy told People several months before his death, “I’ve never had a relationship with her. I wasn’t her father. I was her biological father but I didn’t raise her.”

Nonetheless, Katie was one of the family members who joined to mourn his loss, after he succumbed to his struggles with liver and kidney failure. She credits him with giving her valuable advice about spending a life in the limelight.

“He left me with really great advice. He was like: ‘Don’t ever stop going to class. That’s where you should put your money,’” she told People. “And that’s what I do, and I’ve been able to go from nothing to where I am today and it’s built confidence and self-esteem.”

The actress also admitted to being quite impacted by her father’s final words, writing on Twitter, “My father’s last words were ‘So much wasted time.’ This will be a daily reminder for me to share my gratitude with those I love as to never waste another minute.”

08/17/2018

“KRS 391.315(1)(a) provides the funds remaining in a joint account at the death of a party belong to the surviving party.”

A Payable On Death or POD account is a non-probate transfer arrangement between a bank and a customer. Upon the death of the account owner(s), the account automatically transfers to the beneficiaries as the new owners. It’s also referred to as a Totten trust. Many people use this as a way to simplify transfers of assets at death.

Justia reported in the recent Kentucky case, “Coe v. Schick,” that the use of a Pay on Death (“POD”) beneficiary designation was at issue. It shows the dangers of using the POD beneficiary designation, without consulting with a qualified estate planning attorney.

The bank account and a Certificate of Deposit (CD) were purchased by William in the name of his Trust. However, the problem was that his granddaughter Jennie was a named as the POD beneficiary. William’s pour-over will and trust left all of his assets to his two children Bill and Bonnie. The bank named as trustee at William’s death negotiated the CD and moved its proceeds along with the checking account funds into a new, single trust account after his death.

However, Jennie asserted her rights to the CD and the bank account in William’s probate proceeding. The estate disallowed her claim and ultimately made final settlement and distribution.

After more than eight years of litigation, the Court of Appeals heard the case.

The Court held that a trust can’t have a POD beneficiary designation because a trust can’t die. The Court of Appeals found that the CD was a joint account. State statute defines an "account" as "a contract of deposit of funds between a depositor and a financial institution, and includes a checking account, savings account, certificate of deposit, share account and other like arrangement." A "joint account" is also "an account payable on request to one (1) or more of two (2) or more parties whether or not mention is made of any right of survivorship[.]"

Because the CD was issued to the Trust or Jennie alternatively, it was payable on request to either of them, the Court said. As a result, the CD satisfied the statutory definition of a joint account. The Court went on to explain that joint accounts payable in the alternative, like a CD, give the party who has possession the freedom to negotiate them, even to the detriment of the other party.

In this situation, the bank, as successor trustee, negotiated the CD and placed the funds in a separate account for the benefit of the Trust and its beneficiaries. The Court of Appeals found it proper for the trustee to dispose of the CD in this manner, even without Jennie's authorization or knowledge. The funds from the negotiation of the CD were the sole property of the trust and were to be distributed by the trust's terms.

The case cost the family years in litigation and more than $75,000 in legal fees to resolve a simple POD beneficiary designation. An experienced estate planning attorney will anticipate these kinds of mistakes and avoid the headaches and family turmoil that they create.

08/16/2018

"High taxes and cost of living make these states undesirable for retirees, according to Bankrate.com.”A state’s taxes and cost of living are the most critical factors when deciding where to retire, according to a new survey by Bankrate.com. Think Advisor recently listed the “12 Worst States for Retirement: 2018.”

The least desirable states for retirement typically had poor ratings in the categories for cost of living and taxes, and were also weighed down by low scores in other categories. Bankrate.com created its rankings by looking at seven categories of interest to retirees and weighted those rankings based on the importance given to them by respondents to the firm’s 2017 survey. The categories were:

cost of living (20%);

taxes (20%);

health care quality (15%);

weather (15%);

crime (10%);

cultural vitality (10%); and

well-being (10%).

The last category, well-being, took into account how people felt about their community, friends, health and general purpose. One Bankrate.com analyst remarked that it’s important to have strong relationships with friends and your spouse and spend your money on leisure activities that bring you joy, citing recent research.

The seven factors were averaged, so some states that were down in the rankings had low crime, well-being, health care and cultural quality, even though they scored well on cost of living. Other states with high scores on cultural quality and crime may have done very poorly on cost of living and taxes.